M&A activity in the sector is predicted to pick up once the vaccine rollout gives more clarity on recovery, AlixPartners’ Graeme Smith has forecast.

Smith told MCA’s Restaurant Conference there was potential investment “waiting on the side-lines” to back businesses.

He said consolidation will be an opportunity for businesses to drive growth through acquisition, and secure cost savings through synergies and efficiencies.

Smith said competition reduced by a smaller market, that would enhance the performance of those businesses that survive and make it through to the other side.

He said: “We think the benefit for the businesses that survive is that, with fewer people looking to expand, and more vacant properties, there will be an ability to get more attractive deals with landlords on new sites.

“Expansion will give the opportunity to actually improve returns on capital, because of the reduction in cost in that expansion.”

He added: “We think that activity in the M&A markets will pick up as the recovery comes following the vaccine rollout, and actually for businesses that survive there’s a real chance here to be stronger and more profitable, which will of course be attractive to buyers and investors.”

Smith said business’ resilience and trading through the pandemic, and how it dealt with disruption would inspire confidence in potential buyers.

An updated approach on the shape and operations of a site, and if it was better geared to delivery, would also be key points to consider for a business looking for a buyer.

Other channels, such as meal kits or supermarkets retail, would also attractive to would-be investors, Smith said.

Smith said: “If the business has taken the disruption as a chance to refresh itself, to go through a digital transformation, so it can really build back better and stronger, then all of that gives the investor confidence that this is a business that can thrive on the other side as the market reopens.”

He added: “There’s a lot of investment waiting on the side-lines to back good businesses to take advantage of this, so we can get through and make it through to the other side. There are good prospects for the industry to grow and thrive in the future.”

To watch all the footage from the event please click here.

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